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REPEAT: PBOC Says Retreating from Pandemic Monetary Easing

By: Jason Webb
     MNI (London) (MNI) - The People's Bank of China has begun to withdraw
special easing facilities aimed at supporting the economy through the Covid-19
pandemic, central bank officials told reporters in a briefing on Friday, adding
that the PBOC will signal a moderate and flexible stance as growth recovers in
the second half.
Temporary easing facilities, including relending, rediscounting and excess
liquidity injection, will be retired as financial markets normalise and
countercyclical moves function effectively, said Guo Kai, deputy director of
the PBOC monetary policy department. Stimulus implementing in the first half
totals about CNY9 trillion, he said.
      From now on, credit supply will be kept in line with the pace of economic
recovery, to prevent excess liquidity from building within the financial
system, and financing costs will continue to decline in synch with economic
growth, in order to avoid arbitrage and speculation, Guo said.
The central bank will ensure reasonable and ample liquidity and push actual
lending rates and corporate funding costs significantly lower, he said.
Traditional monetary tools, such as reserve requirement ratio and rate cuts,
will be more effective as policy normalises, Guo said.
The economy is recovering with both consumption and investment improving
"marginally," said Wang Xin, head of the PBOC's research bureau. Investment
will be a critical driving force for the remaining months' growth as exports
may decelerate, but positive monthly producer price inflation in June is a sign
that manufacturing and industrial production are improving, he said.
     The overall macro leverage ratio might have risen in the second quarter,
said Ruan Jianhong, head of the statistics department, stressing that this is
reasonable as the financial sector is strengthening support to the economy.
The risk of shadow banking, mainly involving wealth management products, has
been further reduced as funds from interbank transactions are growing at a
slower pace, investment in non-standard products decline and the relative
leverage ratio grows moderately , Ruan said. WMP assets totalled CNY90 trillion
as of the end of May, she said.
      Guo also explained how the government's goal of requiring banks to forego
CNY1.5 trillion in profits to reduce businesses' costs will be achieved. About
CNY930 billion will come from lowered rates on loans, bonds, and refinancing
tools, he said. Another CNY230 billion will be from allowing small businesses
to postpone loan payments until as late as March 2021, while CNY320 results
from banks' cutting capital-raising fees, Guo said.
 -- MNI London Bureau | +44 203-865-3829 | jason.webb@marketnews.com
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